American Rescue Plan (2021)

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    Move Over, Nerds. It’s the Politicians’ Economy Now.

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    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanWhat to Know About the BillSenate PassageWhat the Senate Changed$15 Minimum WageChild Tax CreditAdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyMove Over, Nerds. It’s the Politicians’ Economy Now.Leaders of both parties have become willing to act directly to extract the nation from economic crisis, taking that role back from the central bank.March 9, 2021Updated 4:58 p.m. ETPresident Biden at a roundtable meeting where he listened to some Americans who would benefit from the pandemic relief measure.Credit…Samuel Corum/Getty ImagesAmerican political leaders have learned a few things in the last 12 years, since the nation last tried to claw its way out of an economic hole.Among them: People like having money. Congress has the power to give it to them. In an economic crisis, budget deficits don’t have to be scary. And it is better for both the economy and the democratic legitimacy of a rescue effort when elected leaders choose to help people by spending money, versus when pointy-headed technocrats help by obscure interventions in financial markets.Lawmakers rarely phrase things so bluntly, but those are the implications of a pivot in American economic policy over the last year, culminating with the Biden administration’s $1.9 trillion pandemic relief bill. It is set to pass the House within days and be signed by President Biden soon after. And while this vote will fall along partisan lines, stimulus bills with similar goals passed with bipartisan support last year.Leaders of both parties have become more willing to use their power to extract the nation from economic crisis, taking the primary role for managing the ups and downs of the economy that they ceded for much of the last four decades, most notably in the period after the 2008 global financial crisis.It is an implicit rejection of an era in which the Federal Reserve was the main actor in trying to stabilize the nation’s economy. Now, elected officials are embracing the government’s ability to borrow and spend — the “great fiscal power of the United States” as Fed Chair Jerome Powell has called it — as the primary tool to fight a crisis.“That’s really been the story of this recovery,” Mr. Powell said at a recent hearing. “Fiscal policy has really stepped up.”The new relief bill is similarly a rejection of the concerns of centrist economists, including the former Treasury secretary Larry Summers and the former I.M.F. chief economist Olivier Blanchard, that its size and structure invite inflation or other problems. Democratic lawmakers have concluded that the favorable politics of this plan outweigh such risks.If sustained, this assertion of control over economic management by elected leaders would be as momentous a change as the one that followed the Paul Volcker Fed in the 1980s.“This is an enduring regime shift,” said Paul McCulley, who teaches at Georgetown’s McDonough School of Business. “Having the tools of economic stabilization work a whole lot more through the fiscal channel and a whole lot less through the monetary channel is a profound, pro-democracy policy mix.”It is in distinct contrast with the experience after the 2008 financial crisis.There was a large 2009 fiscal stimulus action, but a mix of legislative politics and deficit concerns by some officials in President Barack Obama’s inner circle restrained its size. Many of its components were relatively invisible to the average voter. And when the economy remained weak into 2010 and beyond, Republicans and many Democrats focused on deficit reduction. “Stimulus” became a dirty word in Washington.The Fed stepped in, undertaking quantitative easing (essentially, buying bonds with newly created money) and other untested strategies in an effort to keep the expansion going.But central bankers’ tools are limited. They can adjust interest rates and push money into the financial system in hope of making credit easier to obtain. That can spur more investment and spending, which in turn can generate more jobs and higher wages.Sound circuitous? It is — the economics equivalent of a triple bank shot in billiards.In the 2010s, the strategy sort of worked. There was no dip back into recession, and the expansion was the longest on record, until the pandemic ended it. But it took years and years for the economy to return to health, and it was a deeply unequal recovery in which owners of financial assets saw the biggest gains. That the effort was led by unelected central bankers reduced its democratic legitimacy, by appearing as if it were merely an effort by elitist institutions to protect the rich and powerful at the expense of everyone else.“You can do it and it can be successful, but the income and wealth inequality consequences of it will stink to high heaven,” Professor McCulley said. “You can do it that way, but it is anathema to democratic inclusion.”By contrast, fiscal authorities can spend money directly, funneling it where it is needed, without expectation of being paid back. The United States has done exactly that over the last year on a scale with no parallel since World War II.The new $1.9 trillion package includes, among other provisions, $1,400 payments to most Americans, a new child care tax credit that will put $300 per month in the bank accounts of most parents of a young child, help for those facing eviction or foreclosure, and billions of dollars in grants for small businesses. Public opinion polling finds it considerably more popular than other major domestic policy legislation in recent years.“For all the failures and weaknesses of American democracy over recent months, this is a dramatic demonstration of democracy’s power to act,” said Adam Tooze, a Columbia University economic historian who has written extensively of the aftermath of the financial crisis. “When it comes to delivering popular policies at the right moment, working on the basis of established constitutional norms, they’re doing that, which is infinitely to be preferred to an economic policy that depends on well-meaning enlightened technocrats.”Some lawmakers, especially on the left, have raised the notion that relying on congressional action to support the economy improves democratic legitimacy..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.“This legislation has everything to do with restoring the confidence of the American people in democracy and in their government, and if we can’t respond to the pain of working families today, we don’t deserve to be here,” said Senator Bernie Sanders of the Biden bill, known as the American Rescue Plan Act.Republicans unanimously opposed the Biden legislation, but it has not been quite the scorched-earth opposition to deficit-widening action seen during the Obama administration.A signing ceremony last April for one of the several rounds of pandemic relief that the Trump administration put together with bipartisan support last year.Credit…Anna Moneymaker/The New York TimesAs evidenced by previous rounds of pandemic relief, there has been enough common ground between Democrats and Republicans to reach bipartisan agreements of relatively large scale, including the $2 trillion CARES Act enacted last March.“A relief package like this one might not have been everything both parties wanted, but a compromise deal that provides help to Americans is better than no deal at all,” said Tom Cole, Republican of Oklahoma, at the outset of the House debate on a $900 billion bipartisan bill in late December.All in all, Congress and the Trump and Biden administrations have authorized about $6 trillion in pandemic relief spending over the last year, about 28 percent of 2019 G.D.P. (Less than that will ultimately be spent, because the economy’s improvement has left some programs with more money allocated than they needed.)The bipartisan agreement around many of the components of the pandemic aid legislation suggests a future model for how the United States government responds to economic crises. For example, in the past the federal government has extended the duration that jobless people are eligible for unemployment insurance payments during recessions, but has not expanded the size of those payments.The CARES Act, by contrast, increased unemployment checks by $600 a week, aiming to replace the income lost by those forced out of work. Subsequent legislation has included smaller increases. Economists generally say that this has been a well-targeted policy that has helped temporarily jobless people to keep paying their bills — and has softened the collapse of demand in the economy.“We’re at a watershed moment where this type of tool will be used in future recessions,” said Constance Hunter, chief economist of the global accounting firm KPMG. “What we did here is different and unique, and we are going to learn whether it was effective at providing a bridge to the other side of the pandemic.”There are risks in the Biden administration’s approach, of course. If the concerns described by Mr. Summers and Mr. Blanchard about the size of the new relief bill materialize, and the result is excessive inflation or some type of crisis, Democrats will pay a price for their actions.But that’s the thing about democracy: It has much clearer mechanisms for holding elected officials accountable for their economic policy decisions than it does for scrutinizing appointed experts for their interest rate policies. If Americans don’t like the results, they have a straightforward way to make it known: at the ballot box in November 2022 and November 2024.AdvertisementContinue reading the main story More

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    Child Tax Credit, Proposed in Stimulus, Advances an Effort Years in the Making

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    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanSenate PassageWhat to Know About the BillWhat the Senate Changed$15 Minimum WageWhere Trump Voters StandAdvertisementContinue reading the main storySupported byContinue reading the main storyIn the Stimulus Bill, a Policy Revolution in Aid for ChildrenThe $1.9 trillion pandemic relief package moving through Congress advances an idea that Democrats have been nurturing for decades: establishing a guaranteed income for families with children.Anique Houpe, a single mother in Georgia, is among the parents whom Democrats are seeking to help with a plan to provide most families with a monthly check of up to $300 per child.Credit…Audra Melton for The New York TimesMarch 7, 2021Updated 5:03 p.m. ETWASHINGTON — A year ago, Anique Houpe, a single mother in suburban Atlanta, was working as a letter carrier, running a side business catering picnics and settling into a rent-to-own home in Stone Mountain, Ga., where she thought her boys would flourish in class and excel on the football field.Then the pandemic closed the schools, the boys’ grades collapsed with distance learning, and she quit work to stay home in hopes of breaking their fall. Expecting unemployment aid that never came, she lost her utilities, ran short of food and was recovering from an immobilizing bout of Covid when a knock brought marshals with eviction papers.Depending on when the snapshot is dated, Ms. Houpe might appear as a striving emblem of upward mobility or a mother on the verge of homelessness. But in either guise, she is among the people Democrats seek to help with a mold-breaking plan, on the verge of congressional passage, to provide most parents a monthly check of up to $300 per child.Obscured by other parts of President Biden’s $1.9 trillion stimulus package, which won Senate approval on Saturday, the child benefit has the makings of a policy revolution. Though framed in technocratic terms as an expansion of an existing tax credit, it is essentially a guaranteed income for families with children, akin to children’s allowances that are common in other rich countries.The plan establishes the benefit for a single year. But if it becomes permanent, as Democrats intend, it will greatly enlarge the safety net for the poor and the middle class at a time when the volatile modern economy often leaves families moving between those groups. More than 93 percent of children — 69 million — would receive benefits under the plan, at a one-year cost of more than $100 billion.The bill, which is likely to pass the House and be signed by Mr. Biden this week, raises the maximum benefit most families will receive by up to 80 percent per child and extends it to millions of families whose earnings are too low to fully qualify under existing law. Currently, a quarter of children get a partial benefit, and the poorest 10 percent get nothing.While the current program distributes the money annually, as a tax reduction to families with income tax liability or a check to those too poor to owe income taxes, the new program would send both groups monthly checks to provide a more stable cash flow.By the standards of previous aid debates, opposition has been surprisingly muted. While the bill has not won any Republican votes, critics have largely focused on other elements of the rescue package. Some conservatives have called the child benefit “welfare” and warned that it would bust budgets and weaken incentives to work or marry. But Senator Mitt Romney, Republican of Utah, has proposed a child benefit that is even larger, though it would be financed through other safety net cuts.While the proposal took center stage in response to the pandemic, supporters have spent decades developing the case for a children’s income guarantee. Their arguments gained traction as science established the long-term consequences of deprivation in children’s early years, and as rising inequality undercut the idea that everyone had a fair shot at a better life.The economic shock and racial protests of the past year brought new momentum to a plan whose reach, while broad, would especially help Black and Latino families, who are crucial to the Democrats’ coalition.Mr. Biden’s embrace of the subsidies is a leftward shift for a Democratic Party that made deep cuts in cash aid in the 1990s under the theme of “ending welfare.” As a senator, Mr. Biden supported the 1996 welfare restrictions, and as recently as August his campaign was noncommittal about the child benefit.The president now promotes projections that the monthly checks — up to $300 for young children and $250 for those over 5 — would cut child poverty by 45 percent, and by more than 50 percent among Black families.“The moment has found us,” said Representative Rosa DeLauro, a Connecticut Democrat who has proposed a child allowance in 10 consecutive Congresses and describes it as a children’s version of Social Security. “The crystallization of the child tax credit and what it can do to lift children and families out of poverty is extraordinary. We’ve been talking about this for years.”Ms. Houpe’s home state has been crucial to the advance of the benefit. Democrats are in position to enact it only because they won Georgia’s two Senate seats in runoff elections in January, barely gaining control of the chamber. Ms. Houpe decided that she needed to stay home to care for her boys during the pandemic and left a job with the Postal Service that paid nearly $18 an hour.Credit…Audra Melton for The New York TimesWhile Ms. Houpe, an independent, skipped the presidential election, that promise of cash relief led her to vote Democratic in January. “I just felt like the Democrats would be more likely to do something,” she said.Her precarious situation is the kind the subsidy seeks to address. Born to a teenage mother, Ms. Houpe, 33, grew up straining to escape hardship. Though she was young when she had a child, she came close to finishing a bachelor’s degree, found work as pharmacy technician and took a job with the post office to lift her wage to nearly $18 an hour. Raising a son on her own, she took in a nephew whom she regards as a second child.Ms. Houpe seemed on the rise before the pandemic, with the move to a new house. The monthly payment consumed 60 percent of her income, twice what the government deems affordable, but she trimmed the cost by renting out a room and started a side job catering picnics.Biden’s Stimulus PlanFrequently Asked QuestionsUpdated March 6, 2021, 1:58 p.m. ETHow big are the stimulus payments in the bill, and who is eligible?How would the stimulus bill affect unemployment payments?What would the bill do to help people with housing?During the pandemic, she spent six months waiting for schools to reopen until the boys’ plummeting grades — Trejion is 14 and Micah 11 — persuaded her that she could not leave them alone.“I had to make a decision,” Ms. Houpe said, “my boys or my job.”But when her requests for unemployment were denied, the bottom fell out.While critics fear cash aid weakens work incentives, Ms. Houpe said it might have saved her job by allowing her to hire someone part time to supervise the boys.“I definitely would have kept my job,” she said.If she had been receiving the child benefit last year, Ms. Houpe said, she would have used it to hire someone to help watch her boys so she could have kept her job.Credit…Audra Melton for The New York TimesThe campaign for child benefits is at least a half-century old and rests on a twofold idea: Children are expensive, and society shares an interest in seeing them thrive. At least 17 wealthy countries subsidize child-rearing for much of the population, with Canada offering up to $4,800 per child each year. But until recently, a broad allowance seemed unlikely in the United States, where policy was more likely to reflect a faith that opportunity was abundant and a belief that aid sapped initiative.It was a Democratic president, Bill Clinton, who abolished the entitlement to cash aid for poor families with children. The landmark law he signed in 1996 created time limits and work requirements and caused an exodus from the rolls. Spending on the poor continued to grow but targeted low-wage workers, with little protection for those who failed to find or keep jobs.In a 2018 analysis of federal spending on children, the economists Hilary W. Hoynes and Diane Whitmore Schanzenbach found that virtually all the increases since 1990 went to “families with earnings” and those “above the poverty line.”But rising inequality and the focus on early childhood brought broader subsidies a new look. A landmark study in 2019 by the National Academies of Sciences, Engineering and Medicine showed that even short stints in poverty could cause lasting harm, leaving children with less education, lower adult earnings and worse adult health. Though welfare critics said aid caused harm, the panel found that “poverty itself causes negative child outcomes” and that income subsidies “have been shown to improve child well-being.”Republicans may have unwittingly advanced the push for child benefits in 2017 by doubling the existing child tax credit to $2,000 and giving it to families with incomes of up to $400,000, but not extending the full benefit to those in the bottom third of incomes.Republicans said that since the credit was meant to reduce income taxes, it naturally favored families who earned enough to have a tax liability. But by prioritizing the affluent, the move amplified calls for a more equitable child policy.Efforts to increase the benefit and include the needy drew strong support from Speaker Nancy Pelosi and was led in the Senate by the Democrats Sherrod Brown of Ohio, a progressive, and Michael Bennet of Colorado, a centrist. A majority of Democrats in both chambers were on board when unemployment surged because of the coronavirus.“The crisis gave Democrats an opportunity by broadening the demand for government relief,” said Sarah A. Binder, a political scientist at George Washington University.Welfare critics warn the country is retreating from success. Child poverty reached a new low before the pandemic, and opponents say a child allowance could reverse that trend by reducing incentives to work. About 10 million children are poor by a government definition that varies with family size and local cost of living. (A typical family of four with income below about $28,000 is considered poor.)“Why are Republicans asleep at the switch?” wrote Mickey Kaus, whose antiwelfare writings influenced the 1990s debate. He has urged Republicans to run ads in conservative states with Democratic senators, attacking them for supporting “a new welfare dole.”Under Mr. Biden’s plan, a nonworking mother with three young children could receive $10,800 a year, plus food stamps and Medicaid — too little to prosper but enough, critics fear, to erode a commitment to work and marriage. Scott Winship of the conservative American Enterprise Institute wrote that the new benefit creates “a very real risk of encouraging more single parenthood and more no-worker families.”But a child allowance differs from traditional aid in ways that appeal to some on the right. Libertarians like that it frees parents to use the money as they choose, unlike targeted aid such as food stamps. Proponents of higher birthrates say a child allowance could help arrest a decline in fertility. Social conservatives note that it benefits stay-at-home parents, who are bypassed by work-oriented programs like child care.And supporters argue that it has fewer work disincentives than traditional aid, which quickly falls as earnings climb. Under the Democrats’ plan, full benefits extend to single parents with incomes of $112,500 and couples with $150,000.Backlash could grow as the program’s sweep becomes clear. But Samuel Hammond, a proponent of child allowances at the center-right Niskanen Center, said the politics of aid had changed in ways that softened conservative resistance.A quarter-century ago, debate focused on an urban underclass whose problems seemed to set them apart from a generally prospering society. They were disproportionately Black and Latino and mostly represented by Democrats. Now, insecurity has traveled up the economic ladder to a broader working class with similar problems, like underemployment, marital dissolution and drugs. Often white and rural, many are voters whom Republicans hope to court.“Republicans can’t count on running a backlash campaign,” Mr. Hammond said. “They crossed the Rubicon in terms of cash payments. People love the stimulus checks.”The muted opposition to the proposal, he said, showed that “people on the right are curious about the child benefit — not committed, but movable.”An analysis by Sophie M. Collyer of Columbia University underscored the plan’s broad reach. She found that in Georgia, the child allowance would bring net gains per child of $1,700 for whites, $1,900 for Latinos and $2,100 for Blacks.As a suburban independent in a state that was long red, Ms. Houpe is among those whose loyalties are up for grabs. She rejected the argument that a child subsidy would promote joblessness and warned that some parents had to work too much. “My son had football games every Saturday morning,” she said, “and I wasn’t there for him as much as I wanted to be.”If aid posed risks, Ms. Houpe said, so did the lack of any. Out of money last fall, she suffered debilitating depression, and a panic attack grew so severe she pulled her car to the side of road. “My son was freaking out” looking for her asthma inhaler, she said. Still trying to get unemployment benefits, Ms. Houpe has plans for a baking business called The Munchie Shopp. She has practiced strawberries dipped in white chocolate and honed her red velvet cake. This week, she tried dying one blue but denied making a political statement.“During an election, people say anything to win,” she said. “Let’s see what they do.”AdvertisementContinue reading the main story More

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    To Juice the Economy, Biden Bets on the Poor

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    #masthead-section-label, #masthead-bar-one { display: none }The Jobs CrisisCurrent Unemployment RateWhen the Checks Run OutThe Economy in 9 ChartsThe First 6 MonthsAdvertisementContinue reading the main storySupported byContinue reading the main storynews analysisTo Juice the Economy, Biden Bets on the PoorMr. Biden’s bottom-up $1.9 trillion aid package is a sharp reversal from the tax cut bill that was President Donald J. Trump’s first big legislative victory.Volunteers distributing food on Monday in Warren, Mich. President Biden’s economic relief plan overwhelmingly helps low earners and the middle class and is more focused on people than on businesses.Credit…Elaine Cromie for The New York TimesPublished More